shareholder activists

Are activist investors a force for good that keeps management and boards honest? Or are they simply quick buck artists intent on creating short-term value at the expense of building long-term sustainable companies?

Rather than enriching themselves by buying back stock at prices near all-time highs, CEOs should instead reinvest in their businesses, including their employees. Doing so will drive long-term growth and sustainability for corporations and the economy at large, better balancing the interests of all stakeholders.

Thanks to a bull market and strong relative returns, assets under management for activist investors have swelled — tripling in just the last five years — allowing these high profile fund managers to launch more campaigns and take on bigger companies.

Activist investors have significantly raised their profiles in recent years. According to Activist Insight, there were 237 activist campaigns launched in 2013, up from less than 30 in 2000. And while activists used to fly mostly under the radar, many have now embraced new media platforms as a way to make their cases heard.

About 43% of 574 global respondents to this week’s poll dismiss reports of an upturn in shareholder activism as exaggerated and think any perceived increase is primarily attributable to the savvier use of media by activist investors.

In the second quarter of 2013, institutional investors added to their equity holdings in the financial sector while reducing their exposure to energy stocks. Among the most widely held stocks, portfolio managers as a group added to positions in Microsoft, General Motors, Cisco, and Intel, and trimmed positions in Pfizer, Oracle, General Electric, and AT&T.

The EU's policing of its budget rules might actually encourage countries to breach its limits, writes Viktoria Dendrinou. Although the EU has reprimanded countries for breaking the Stability and Growth Pact, it has ultimately stopped short of imposing sanctions on offenders. Bloomberg (tiered subscription model) (20 Jan.)

Italy's central bank expects the country's economy to grow by just 0.6% this year and 0.9% in 2020, according to its latest quarterly economic bulletin, down from earlier projections of 1% and 1.1%, respectively. Vincenzo Boccia, head of business lobby Confindustria, said the Italian government must do more to stimulate growth and cut the deficit. Yahoo (20 Jan.)

Ireland rejected a proposal by UK Prime Minister Theresa May to negotiate a bilateral deal over its post-Brexit border with Northern Ireland. Instead, Ireland continues to support the Brexit deal agreed upon by the British government and the EU, said Deputy Prime Minister Simon Coveney. Politico (20 Jan.)

CFA Institute is the global, not-for-profit association of investment professionals that awards the CFA® and CIPM® designations. We promote the highest ethical standards and offer a range of educational opportunities online and around the world.

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